Ducey Pal Elizabeth Holmes Convicted For Theranos Fraud

Above: Gov. Doug Ducey signed legislation in 2015 to allow people to order their own blood tests. Elizabeth Holmes, founder of Theranos, who lobbied for the change, is at left.

We need to use Mr. Peabody’s WABAC (wayback) time machine to journey back to 2015, when this fraudster and grifter came to Arizona, and the state legislature and Governor Doug Ducey fell all over themselves for this grift, big time. It should remain a permanent stain on all of their political careers for poor judgment.

As Howard Fischer recounts, Businesswoman who lobbied for helpful law on trial for fraud:

Elizabeth Holmes, who got state lawmakers and Gov. Doug Ducey to change Arizona law in 2015 to financially benefit her company, goes on trial this week on criminal charges of fraud and conspiracy.

Holmes, the founder and former CEO of Theranos, is accused of knowingly misrepresenting the capability of her finger-prick blood testing technology. The company, which already settled consumer fraud charges in Arizona, went out of business after a Wall Street Journal investigation questioning her claims.

Now she faces a potential 20-year prison term and fines of up to $250,000 on various charges of federal wire fraud.

But it was a different Elizabeth Holmes who showed up in Arizona years earlier and convinced lawmakers and Gov. Doug Ducey to alter state statutes to allow people to order more types of blood tests without needing a doctor’s permission. That, in turn, paved the way for Theranos to promote its testing to individuals as well as some pharmacies.

In a ceremony signing the bill at the company’s Scottsdale offices, the governor said he was “proud to sign” legislation for “reducing burdensome barriers and red tape.”

So proud, in fact, that Ducey’s signing satement promoting this fraud remains online to this day. Governor Doug Ducey Signs Legislation Reducing Barriers to Efficient, Cost-Effective Health Care.

But two years later, after the company was forced to refund $4.6 million to Arizonans who got her company’s tests and may have been defrauded, an aide to the governor said Ducey had no second thoughts.

This is the guy whose judgement we were supposed to trust to handle the Coronavirus pandemic. And you wonder why he has been an abject failure and criminally negligent in his mishandling of the Coronavirus pandemic. He creates a mess and then says “It’s not my problem” to clean up, blaming others for his lack of jiudgment, and leaving it to others to clean up his mess.

“The governor has always said it’s up to any new business models and companies to prove themselves,” said Daniel Scarpinato. “He is pleased the attorney general was able to reach a settlement on this issue.”

[At] the 2015 signing ceremony with Ducey, Holmes said she thinks the new law actually would lead to better health. She said anywhere from 40% to 60% of people who get lab orders from their doctors do not bother to follow through.

Holmes said this puts people in control to decide what tests to have. And once they have the results, she said they will take the paperwork and go see a doctor if they have questions.

Two years later, Theranos signed a consent degree with Attorney General Mark Brnovich.

Company lawyers denied Theranos violated the state’s Consumer Fraud Act in selling blood tests where the results were not always accurate. They conceded, though, that more than one out of every 10 of the tests results given to Arizonans by the company were “ultimately voided or corrected.”

The company agreed to provide full reimbursement to anyone in Arizona who got the tests during a three-year period, a figure calculated at $4.6 million. It also agreed to $200,000 in civil penalties, $25,000 in legal fees and to pick up the cost of someone to find the customers and distribute the refunds.

At the same time, Theranos announced a deal with the Centers for Medicare and Medicaid Services to stay out of the blood-testing business for at least two years. Holmes had previously been banned by federal regulators from owning or operating a testing facility for two years.

A year later, Theranos and Holmes settled with the federal Securities and Exchange Commission over charges that she had raised more than $700 million while making it appear the company had successfully developed a portable blood analyzer that could perform a full range of laboratory tests from a small sample.

Holmes agreed to pay a $500,000 fine, relinquish control of the firm, and be ineligible to serve as a director or officer of a publicly traded company for 10 years. She also agreed to return about 19 million shares of Theranos she obtained during the fraud.

All this directly relates to the criminal case that will unfold in a San Jose, Calif. courtroom …

Jumping forward in time back to today. The LA Times reports, Former Theranos CEO Elizabeth Holmes guilty of fraud and conspiracy:

A jury found fallen Silicon Valley star Elizabeth Holmes guilty of fraud for turning her blood-testing startup Theranos into a sophisticated sham — one that duped billionaires and other unwitting investors [including the Arizona legislature and Governor Doug Ducey] into backing a seemingly revolutionary company whose medical technology never worked as Holmes promised.

The 37-year-old Holmes was found guilty on two counts of wire fraud and two counts of conspiracy to commit fraud on Monday after seven days of deliberation. The jury decision followed a three-month trial featuring dozens of witnesses — including Holmes herself — and numerous exhibits. She now faces up to 20 years in prison for each guilty count, although legal experts say she is unlikely to receive anything close to the maximum sentence.

The jury deadlocked on the three remaining charges. The split verdicts are “a mixed bag for the prosecution, but it’s a loss for Elizabeth Holmes because she is going away to prison for at least a few years,” said David Ring, a lawyer who has been following the Holmes case closely.

Federal prosecutors spent much of the trial providing testimony and evidence to depict Holmes as a charlatan obsessed with fame and fortune. In seven days on the witness stand, Holmes cast herself as a visionary trailblazer in male-dominated Silicon Valley who was emotionally and sexually abused by her former lover and business partner, Ramesh “Sunny” Balwani.

Holmes, who had bowed her head several times before the jury was polled by the judge, remained seated and expressed no visible emotion as the verdicts were read. Her partner, Billy Evans, showed agitation in earlier moments but appeared calm during the verdict reading.

U.S. District Judge Edward Davila will determine Holmes’ sentence.

The trial provided a detailed look inside one of the go-to moves of Silicon Valley entrepreneurs — conveying a boundless optimism regardless of whether its warranted, known as “fake it till you make it.”

[B]ut the bold dream Holmes pursued when she founded Theranos in 2003 as a 19-year-old college dropout had become a mortifying nightmare by the time she was indicted on felony charges in 2018. Her conviction might lower the wattage — at least temporarily — on the brash promises and bold exaggerations that have become a routine part of the tech industry’s innovation hustle.

During that span, Holmes went from an unknown to a Silicon Valley sensation who had amassed a $4.5-billion fortune on paper to a vilified failure. Her downfall has been dissected in documentaries, books, podcasts and soon will be rehashed in a Hulu TV series called “The Dropout” starring Amanda Seyfried in the lead role.

After starting Theranos, Holmes began working on a technology that she repeatedly promised would be able to scan for hundreds of health issues with just a few drops of blood taken with a finger prick instead the conventional method requiring a needle to be stuck in people’s veins. She aimed to upend an industry dominated by giant testing companies such as Quest Diagnostics and Labcorp, starting with setting up “mini-labs” in Walgreens and Safeway stores across the U.S. that would use a small Theranos device called the Edison to run better, faster and less-intrusive blood tests.

The concept — and the way Holmes presented it — enthralled wealthy investors eager to buy an early stake in a game-changing company. It helped Theranos raise more than $900 million from savvy billionaires such as media mogul Rupert Murdoch and software magnate Larry Ellison, as well as well-to-do families such as the Waltons of Walmart and the DeVos clan behind Amway.

What few knew at the time was that Theranos’ blood-testing technology kept producing misleading results. That forced patients to undergo regular venous blood draws instead of the promised finger pricks and led Theranos to secretly test those samples using conventional machines in a traditional laboratory setting. Evidence presented at the trial also showed Holmes lied about purported deals that Theranos had reached with big drug companies such as Pfizer and the U.S. military.

The deception eventually backfired in 2015 after a series of explosive articles in the Wall Street Journal and a regulatory audit of Theranos uncovered potentially dangerous flaws in the company’s technology, leading to the company’s eventual collapse.